Abkhazia: Is Chinese Investment a Panacea or a Pipe Dream?

Spend enough time at Brehalovka, an iconic coffee house and hotbed of political gossip on Sukhumi’s seaside promenade, and you are bound to hear whispers of Chinese interest in investing in the separatist territory of Abkhazia. Russia remains Abkhazia’s political overlord, but many locals are hoping China will become a major economic player.

If it pans out, Chinese interest in this former Soviet holiday hotspot could have major economic and geopolitical ramifications. But is the renminbi’s purported arrival a panacea for stagnating Abkhazia, or merely a pipe dream?

“Did you hear that at Brehalovka?” said Abkhazia’s de-facto foreign minister, Daur Kove, with a laugh, when questioned in his office in central Sukhumi about Chinese investment prospects.

“It’s true that there is a project under discussion to build a road from Abkhazia to the North Caucasus. The name of a Chinese company has arisen, but it was all very preliminary,” Kove said. Kove’s deputy, Kan Taniya, was more blunt. “Lots of blah blah blah, nothing concrete,” the 29-year-old said.

The local interest in Chinese investment is understandable. Almost 25 years after Abkhazia broke away from Georgia, conflict-damaged buildings still dot the otherwise picturesque Black Sea territory, and derelict houses are ubiquitous. Unable to access multilateral development funding due to its lack of international recognition, and already heavily dependent on Russian funding, de-facto President Raul Khajimba’s government desperately needs cash.

Kove’s predecessor, Viacheslav Chirikba, is among the more bullish on China’s potential arrival in Abkhazia. “There is Chinese trade interest in Abkhazia,” he said over Turkish tea in his favorite Sukhumi cafe. “They are interested in foodstuffs – products which can be produced here and exported to China. They are particularly interested in our wine, because wine is now in fashion among the middle class in China. But the investment is mainly small-scale – I would not say there is any Chinese influence yet.”

Abkhazia has a representative based in China, although EurasiaNet’s requests for comment, sent to the provided email address, went unanswered. Representatives of the de-facto Abkhazian Foreign Ministry have previously travelled to Beijing for meetings. In the other direction, Chinese entrepreneurs have begun exporting goods to Abkhazia, mainly furniture and clothing, Chirikba said. For a short while, there was even a Chinese restaurant in Sukhumi run by a Chinese chef, although that venture did not last.

A small number of Chinese tourists have also made trips across Central Asia to Abkhazia’s Black Sea shores – according to tourism authorities. Over 99 percent of the approximately 1.5 million foreigners who visit Abkhazia per year are Russian.

China could, in theory, play an intriguing geopolitical role for Abkhazia. Sukhumi’s leaders are uncomfortable with the extent of their dependence on Russia, which provided almost $50 million in financial support to the Abkhazian leadership in 2017. In past years, Russian subsidies have constituted up to 70 percent of the Abkhazian budget. Since breaking away from Tbilisi’s authority, Abkhazia has tended to view Russia as a protector against the possibility of reintegration into Georgia; Moscow has provided Russian passports to Abkhazians, enabling them to travel internationally.

A potential obstacle to Chinese investment in Abkhazia is Beijing’s ties with Georgia. Georgia has been labeled by some analysts as the Caucasus hub of China’s One Belt, One Road (OBOR) program, and in May, the two countries signed a free-trade agreement. Officials in Tbilisi would likely look askance at any Chinese aid to Abkhazia that bolstered the region’s sovereignty aspirations.

At the same time, a common interest in investment from China could spur Abkhazian-Georgian détente, Chirikba contended. “It could even be a conflict resolution mechanism if all sides are interested in Chinese money, as they are,” he said. “Abkhazia and Georgia could come to a deal, as they have with the Enguri power station, to earn money as a transit hub.”

Many experts are skeptical, however, noting that Chinese investments are relatively small in the Caucasus in general. “Large commitments of Chinese interest with official backing in Georgia would have to wait until demonstrable improvements infrastructure,” said Dong Yan, a doctoral candidate at the University of California, Los Angeles, who tracks China’s policies in the Caucasus.

“In the meantime, Chinese interest via OBOR in Georgia will be limited to small-scale undertakings by private businesses,” Yan added.

“Abkhazia is an awkward prospect for China,” said Dirk van der Kley, a China specialist at the Australian National University. “China has its own thorny territorial issues so, not wanting to undermine its own position, the Chinese government will only deal with an internationally recognized government. China also wants to maintain good relations with Russia. On top of these issues, Abkhazia is an incredibly tiny place of little economic value, so I do not anticipate large Chinese government funds flowing there – it is simply too much hassle.”

Across the border in Georgia, there has been a degree of xenophobic backlash against Chinese investment. Last year, fights broke out between Chinese workers and locals in a village in western Georgia. Subsequently, “the Georgian media was full of rumours about a Chinese invasion and the Chinese masterplan of taking over the world,” said Susanne Fehlings, a lecturer at Frankfurt’s Goethe University who studies trade in the Caucasus.

In Abkhazia, that kind of resistance would be unlikely. “In Abkhazia we do not have proper discussions about benefits and risks,” said Liana Kvarchelia, the director of the Centre for Humanitarian Programmes in Sukhumi. “Because of partial [international] recognition and current investment coming predominantly from one source, we are not in a situation where we can pick from various options. What choice do we have?”

Sitting in the stands of Sukhumi’s Russian-funded Dynamo Stadium, Astamur Adleyba holds court while watching his beloved football club – the former mayor of Sukhumi is Dynamo Sukhum’s chairman. From his seat, Adleyba can just glimpse the burnt-out parliament building in the distance, a reminder of Abkhazia’s painful past.

“Abkhazia is open for investment,” Adleyba said, glancing toward the war-damaged structure. “We want to attract foreign business from anywhere.”